The Internet is an effective tool for commercial communication. Companies electronically communicate with consumers to cost-effectively promote their goods or services. Normally, an Advertising Service Company (ASC) contracts with web publishers who have advertising placement space (such as banner ads), and with advertisers, such as Internet retailers. For example, a user browsing the Internet World Wide Web may click on a banner ad, which will lead the user to the advertiser's retail website. This is known as third-party ad-serving, and is one environment in which the preferred embodiment of the invention may operate.
When a user visits a website, a unique identifier (e.g. cookie) associated with the computer or other device employed by the user is written to the user's computer hard drive by the advertising service company, and information about the visit is stored in the company's database. The recorded information may include logging the interaction with the user's cookie anytime he/she views an advertisement, clicks an advertisement, or visits a page on an advertiser's site, where an “action tag” is loaded to capture the interaction. The cookie interactions are used to tie transactions on the advertiser's site to interactions (views and clicks) with advertisements. The cookie interaction is logged whenever an impression of an advertisement is served, whenever a user clicks on the advertisement, or whenever the user undertakes any of a wide variety of actions including page views, commercial transactions, provision of information such as an email address for future communications, and any other activity desired by the advertiser. For purposes of this discussion, all of these activities are considered to be “actions,” as contrasted with “impressions” of advertisements served, but not acted upon.
In conventional Internet advertising approaches, advertisements are served by placement. Advertisers (or the service companies that assist and represent them) must determine which web sites, publishers, and placements provide the best-suited demographic, psychographic, or behavioral segment to reach with advertisements. Of course, as with any broadcast form of advertising, many of those who receive the advertisement will not be of the desired demographic, psychographic, or behavioral segment. Nonetheless, even slight differences among sites is enough to lead an advertiser to prefer one site over another. A problem with this approach is that pricing is based on the number of ads served, even if served to those who are not likely to respond positively to the ads.
Another problem is that users face advertisements that are of no interest, are distracting, and convey no relevant information, making the Internet relatively less appealing than other forms of information gathering, entertainment, or shopping. When a user receives an ad that is of interest, his browsing experience is enhanced, and he is more likely to return to the publisher's site in the future. Thus, publishers are more interested in offering advertising space to advertisers their visitors most value (or least object to, or find most relevant).
Even with the best available information about a web site's demographics, advertisements must be displayed to many users unlikely to respond, in order to reach a user of a demographic, psychographic, or behavioral segment likely to respond. Bulk email transmissions provide a much more targeted approach, but with significant disadvantages. A list of known prospects (such as the group of people who subscribe to a particular magazine, or who have purchased particular goods) can form the basis for a targeted email solicitation. While effective in some circumstances, these have several disadvantages. Commercial emails may be filtered by the recipients' software, received messages may be viewed as a distraction when they arrive at the wrong time of day, and excess commercial email may be generally unwanted by many users.
Other systems may use databases of information that associate user cookies with other information that helps to establish which users are the best prospects for particular advertisements. A problem with these and related systems is that only a minor fraction of users are associated with useful information. Thus, even though a particular advertisement might be served to all users whose cookies are associated with membership in a particular organization, or subscription to a particular magazine, such users are probably only a small minority of all of those to visit a given publisher's site. Accordingly, even if an advertiser would be willing to pay a premium to reach those users with a given advertisement, the cost of the advertisement would be expensive because even the users not in the desired demographic, psychographic, or behavioral segment would need to be served advertisements. Even if the advertiser arranged only to serve a targeted advertisement to the particular selected users, and the remaining visitors were served a different advertisement in the same place, the small number of targeted advertisements served (even at a higher price per ad) would likely be so small (perhaps only 5% or less) that the transaction would be of little interest to the publisher.
In addition, publishers would be understandably reluctant to have advertising served only to selected visitors, because this would leave blank space in the ad placement space (or random ads or other filler material.) To provide enough revenue, the publisher would need to devote a larger portion of a web page to the advertisements, which would reduce desired content.